On the surface, it looked like just another awesome mega-deal. There were the top executives up on stage, palling around like local-TV anchors... and assuring everyone that this would be a merger of equals, a careful blending of two companies, two cultures. But make no mistake: America Online is the acquirer. The trading symbol for the new company, tellingly, is AOL.
Given the realities of the 'New Economy', it could hardly be otherwise. By now, the pattern is clear: The digital will prevail over the analog, new media will grow faster than old, and the leaders of the Net economy will become the 21st century Establishment. If the ascendance of the Net economy were not clear already, the Jan. 10th announcement of America Online Inc.'s $183 billion deal to purchase Time Warner... the biggest deal ever... should be taken as proof positive. AOL has just one-fifth the revenue and 15% of the workforce of Time Warner, itself the combination of publishing and entertainment empires, that have been fixtures in America culture since the 1920s. But with a New Economy stock that investors
valued at nearly twice that of the Old Economy icon, AOL had the resources to be the buyer, not the bought.
'The deal shows the torch has passed,'
says Bruce Leichtman, director of media and entertainment strategies at research firm Yankee Group.
Now, New Economy titans Stephen M. Case and Robert W. Pittman will team up with Old Economy strategist Gerald M. Levin, CEO until 2003, to assemble a new kind of conglomerate whose very existence will likely change the contours of the information and entertainment media, digital and otherwise. Case, who will be chairman of AOL Time Warner, is making a huge bet. By melding the Time Warner colossus with his Internet empire, he will create a hybrid with unmatched advantages as the long-anticipated convergence of entertainment, information, communications, and online services comes about in the next few years.
It is a bid to define the future. By assembling more assets, audiences and advertisers for the new digital marketplace than anyone has previously even thought of, Case, and AOL President Pittman, see a chance to move so far ahead that others won't catch up for years. This echoes the way Alfred P. Sloan audaciously engineered the creation of the 'General Motors Corp.' in the 1920s, which produced the corporation that dominated the U.S. in the Auto Age.
'This should provide encouragement for other combinations that wouldn't have been thought possible,'
Time Warner Chairman Levin told 'Business Week' on Jan. 11.
'This turns things upside down, inside out. If you'd said a couple years ago that AOL would buy Time Warner, we'd say 'pass the bong.'
Zona Research Inc.'s Harry Fenik, vice president of analysis, on America Online Inc.'s proposed $184 billion purchase of Time Warner Inc.
'I did it with as much enthusiasm as when I first made love 42 years ago.'
Ted Turner, 61, Time Warner vice chairman, commenting on his vote in
favour of America Online's purchase of Time Warner.(Bloomberg News
'Did I just hear my 'puter say....'You've got
mail... we've got everything else!"???